Opening Range Breakout

Opening Range Breakout

In this article, I am going to discuss the Opening Range Breakout in detail. Please read our previous article, in which we discussed the Opening Range Trading Strategy. At the end of this article, you will understand the following pointers in detail.

  1. What is the opening range?
  2. What is the opening range breakout?
  3. Opening range breakout types
  4. Breakout entry for volume and price action
  5. After entry volume and price action
What is the Opening Range (OR)?

The Opening Range is the difference between the first high and low of the day. How to find high and low? At least one candle should be completely against the initial move.

What is the Opening Range (OR) What is the Opening Range (OR)

The benefits of Opening Range Breakout Trading

There are several benefits to trading breakouts. For example…

  • Momentum is with you – Trading breakouts allow you to enter your trade with momentum at your back.
  • Catch big trends – If you were to trade pullbacks, sometimes it may never come. But with breakouts, you never have to worry about missing another move in the markets.
  • It gives us defined entry and exit (stop loss) points.
Demerit Opening Range Breakout Trading
  • False breakout or smart money trap
  • Maximum time breakout failed

So, breakouts should be traded at the proper time. Here are two approaches to trading the breakout designed to minimize risk:

  1. Buy the initial breakout when the conditions are right
  2. Buy the retracement to the breakout when you need confirmation

Tips:- When the opening range is not clear, stay away from the opening range trading market

Opening Range Breakout

Note: From now on, we will discuss only bullish breakouts. The exact opposite for a bear breakout

Opening Range Breakout players
  1. professional
  2. Those traders who have shorted the market will now be forced to cover their poor positions by buying as well. Short covering buy order above the opening range high
  3. those traders not in the market may feel they are missing out and will be encouraged to start buying
Principle for an opening range breakout
  • Identify how much a stock retraces relative to how much initial move in the opening range.
  • Pay attention to the reaction and how stocks tend to act during this period.
  • The volume activity during the opening range period

Based on the above three-pointers, we have divided the opening range breakout into 3 types. These are

  1. Opening range breakout
  2. Opening range Accumulation breakout
  3. Opening range Absorption breakout
What is the Opening Range Breakout?

Opening Range Breakout means the price moves below well-defined support (opening range low) or above resistance (opening range high)


Opening range breakout depends on open 3 factors

  1. Strong initial move (1 or more than one candle)
  2. Price consolidate at opening range high(Flat pullback)
  3. An unusual volume in the opening range
Strong initial move

These are the directional moves with smart money participation and conviction. If it is at the start of a trading session, An open drive is generally caused by participants who have made their market decisions before the opening bell. The market opens and moves aggressively in one direction.

Strong initial move in Opening Range Breakout

Price consolidate AT opening range high.

In strong trending markets, you’ll have a Flat pullback (price consolidates high of the day). Usually, stocks move in a horizontal, low-volatility, trendless manner. Most of the trading is near one end of the range. A Structural Feature Sign of Strength Price holds gains after an up move “Eating through” residual supply

  • OVERLAPPING BAR hugs the level. It shows his level is no longer a strong reference point, and The price will move with the current pressure. If the level is strong, then the price should react immediately
  • retailer’s taking profit to reduce risk. The market pulls back and goes sideways. Once bulls are confident that the bears will fail to reverse the trend, bulls buy again with the tighter stop loss(if find this pattern, find the middle of the trend)
  • The price should above Vwap
  • Price should not break the opening range high
  • Price consolidates within a tight trading range

Price consolidate AT opening range high


Initial move volume should be clearly expand the previous day’s volume

Why high volume on the initial move of the day?

We are trying to identify the SM sentiment for the day. If Smart Money wants to buy stock, we would see that on the open with high volume and strong directional moves.

Why high volume on the initial move of the day?

Rules for an opening range breakout
  1. Wait for the first initial move to complete. should be a strong candle
  2. Volume should be clearly expanded than the previous day
  3. Price consolidating at a high of the day(flat pullback)
  4. High the opening range should not break
  5. Declining or lower volume on retracement candle
  6. The price must be above vwap
  7. Entry above the opening range high
  8. Stop loss below the opening range low

Rules for opening range breakout benefits of Opening Range Breakout Trading


Demerit Opening Range Breakout Trading Opening Range Breakout Opening Range Breakout players Principle for opening range breakout

Opening Range Accumulation Breakout Strategy


The big institutions that move and manipulate the market build up their massive trading positions in a well-defined trading range. After they fully enter their positions, then they initiate strong and aggressive buying or selling activity to move the price. They strive to move the price in the direction of their newly accumulated positions.

May happen at the opening range high or above the opening range

Characteristics of re-accumulation
  • Immediate background must have strength. Strong move
  • Re-accumulation areas are generally in a well-defined range.
  • Reaction volume remains low, and volume increases at support
  • Upthrust and spring can appear
  • Springs at lows are the best indications of ACCUMULATION.
  • Failure of price to break support after basing above it
  • Stronger BULL candles in the range
  • Price Above vwap

Characteristic of re accumulation Opening Range Accumulation Breakout Strategy

What is Opening Range Breakout?

Opening range Absorption breakout

Opening range Absorption breakout

Why high volume on the initial move of the day?

Smart money observes supply at resistance, which means smart money observes supply coming from long liquidation, profit-taking, and new short selling.

Characteristic of Opening range Absorption breakout
  • Immediate background must have strength. Evidence of Demand Overcoming Supply
  • When viewed as a correction, absorption areas are generally shallow. The main characteristic of BUYERS overcoming SELLERS is the repeated inability of prices to REACT away from opening range high.
  • Reaction volume remains low
  • rising supports and expanding volume on up‐swings
  • AFTER upthrust(breakout failure), the price is unable to move down and unable to break the last swing low

Characteristic of Opening range Absorption breakout

Rules for opening range breakout What is the Opening Range

What is Opening Range Breakout? Rules for opening range breakout Characteristic of Opening range Absorption breakout

After entry
breakout candle

Clean wide range candle close above the opening range high

breakout candle

Breakout volume
It should be high or above high. Why?
  • If you see high volume accompanying wide spreads, this shows that the smart money was prepared to absorb any selling from those locked-in traders who decided to sell. In this situation, the market-makers anticipate higher prices and are bullish.
  • High volume breakout should follow through.

The danger signs to watch for at the breakout is the opposite price pattern. If the stock breaks out on good volume but immediately reverses and trades below the breakout point on continued big volume, it means that there is too much supply at the new high price. This is a major warning sign. The big volume at the breakout will now represent significant resistance if the stock is below it. This pattern of a big-volume reversal at the top of the OR usually leads to a failed breakout and a selloff.

Average volume breakout

Often, the breakout occurs on light volume, but as the stock climbs, the volume will increase, which is also a positive sign.

Average volume breakout

Should be high or above high. Why? Breakout volume


Why does breakout need follow-through?

  • For confirmation of the successful breakout
  • Avoiding the smart money trap (stop loss hunting)
Smart money trap

Hunting the stops is a phrase that describes a situation where smart money pushes the stock to trade above (resistance) a certain price because they expect that there are a lot of resting orders to buy the stock if it trades above that particular level. The motive for doing this is that if the trader buys the stock to trigger an advance through the price, then the flurry of stop orders will push the price even higher, at which point the trader would sell the stock to the stop orders being executed. If a breakout is created by a large number of stop orders being executed, the subsequent price action will usually be an immediate reversal back into the range. An immediate reversal is, therefore, a warning sign that the breakout is not going to be clean!

For confirmation of successful breakout

Traders like to see a confirmation after the breakout – one more bullish candle after the breakout candle. A bull break followed by a bull break is a sign of follow-through and, thus, an indication of bullish enthusiasm for as long as it lasts.

  • If the price rises, the volume is high, and the price remains above its opening price after the early morning pullback, it is an excellent sign that the stock has further to go on the upside.

For confirmation for successful breakout

Smart money trap Demerit Opening Range Breakout Trading Why high volume on the initial move of the day?

Please watch the following video to learn and understand the opening range breakout concept better.

In the next article, I will discuss 3 Rules for Stock Volume Analysis in Trading. In this article, I try to explain the Opening Range Breakout in detail. I hope you enjoy this article. Please join my Telegram Channel, YouTube Channel, and Facebook Group to learn more and clear your doubts. 

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